Fierce bidding seen for spectrum after RIL's entry

NEW DELHI Thu Jan 16, 2014 5:17pm IST

A woman walks past a poster of Reliance Industries installed outside the venue of the company's annual general meeting in Mumbai June 7, 2012. REUTERS/Vivek Prakash/Files

A woman walks past a poster of Reliance Industries installed outside the venue of the company's annual general meeting in Mumbai June 7, 2012.

Credit: Reuters/Vivek Prakash/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - Reliance Industries'(RELI.NS) surprise entry into an auction for mobile phone spectrum has raised the prospect of fierce bidding, intensifying competition in a crowded cellular market that has seen margins improve after a lengthy price war.

Reliance, controlled by India's richest man Mukesh Ambani, sits on a cash pile of nearly $15 billion, which gives it an advantage at the spectrum auction over rivals like market leader Bharti Airtel (BRTI.NS), which had nearly $10 billion in debt as of end-September.

Reliance also already owns a nationwide licence for high-speed 4G mobile phone networks, which it won by outbidding rivals three years ago. The service, by its Reliance Jio Infocomm unit, has yet to be launched.

"The immediate impact is that of intense competition in auctions," Credit Suisse analysts said in a note.

"The longer term impact could be increased competition and higher capex for incumbents," the brokerage said, downgrading shares in Bharti Airtel and third-ranked Idea Cellular (IDEA.NS).

Shares in Bharti Airtel and Idea tumbled on Thursday, largely due to Reliance's application to bid. Bharti stock closed 4.8 percent lower, its biggest drop since September last year, while Idea Cellular (IDEA.NS) tumbled 7.2 percent, losing the most since May 2010.

Reliance on Wednesday joined seven carriers including Bharti, Vodafone (VOD.L) and Idea to bid for spectrum in the auction. India hopes to raise at least $1.8 billion during the fiscal year to March from the auction which is scheduled to start on February 3.

Reliance gets most of its revenue from oil and gas. The spectrum bands it applied to bid for would enable the company to provide basic cellphone services, which account for more than 80 percent of industry revenue in India, a country where call rates are among the cheapest in the world.

Most Indian telecom operators saw razor-thin margins improve slightly last year after they were able to raise call prices, helped by a court order that revoked permits of some smaller carriers, which were forced to scale back or shut down.

Two bands of frequencies -- 900 megahertz and 1800 megahertz -- will be sold. Bharti and Vodafone want spectrum in the 900 MHz band to renew permits in key cities like Delhi and Mumbai but they could also use the spectrum for 3G services.

Reliance Industries could use the 1,800 MHz band to offer cellphone services or a different kind of 4G network. With the 900 MHz spectrum, it could provide 2G as well as 3G mobile services.

Reliance aims to buy spectrum in both bands as 900 MHz is not available beyond Delhi, Mumbai and Kolkata, said a person familiar with the company's plans who declined to be named as he is not authorised to talk to the media.

Reliance already has deals to share infrastructure with both Bharti and Reliance Communications (RLCM.NS), which is controlled by Mukesh Ambani's brother, Anil Ambani.

(Editing by Tony Munroe and Miral Fahmy)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Markets

REUTERS SHOWCASE

Canada Shooting

Canada Shooting

Attack on parliament, killing of soldier stun Canada's capital.  Full Article 

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage